Pugh v. Fairmount Gold & Silver Mining Co., 112 U.S. 238 (1884)

U.S. Supreme Court

Pugh v. Fairmount Gold & Silver Mining Co., 112 U.S. 238 (1884)

Pugh v. Fairmount Gold and Silver Mining Company

Argued October 22, 1884

Decided November 10, 1884

112 U.S. 238

Syllabus

If holders of notes of a corporation, secured by a mortgage of its realty, agree to convert their notes into stock upon a condition which fails, the right to foreclose the mortgage is not affected by the agreement.

This was a bill filed on November 26, 1875, by Thomas Hare and Jonathan H. Pugh, trustees, to foreclose a mortgage executed to them on August 22, 1870, by the Fairmount Gold and Silver Mining Company, to secure the bond of the company for $17,000. It appears from the record that at the date of the mortgage the mining company was indebted to various persons, who held its promissory notes or certificates of indebtedness, given and bearing date between August 4, 1868, and May 20, 1870, and amounting in the aggregate to $16,387.05, all bearing interest at the rate of six percent per annum. To secure the payment of this indebtedness to the holders of the notes, the mining company, on August 22, 1870, executed a bond of that date to Hare and Pugh in the penal sum of $34,000, conditioned for the payment to them at the expiration of one year from date of the sum of $17,000, with interest at the rate of six percent per annum, payable half yearly in gold. This bond was secured by the mortgage which the suit was brought to foreclose, bearing the same date, and conveying to Hare and Pugh certain mines, a mill site, mill and machinery in Clear Creek County, Colorado. Contemporaneously with the execution of the bond and mortgage, Hare and Pugh executed a declaration of trust to the effect that they held the bond and mortgage in trust for the benefit of the holders of the notes of the mining company above mentioned, and that if the mining company should pay off the notes the bond and mortgage should be taken as paid and satisfied, and should be cancelled. The bill averred that the bond was due and wholly unpaid, and prayed a foreclosure of the mortgage.

John W. Thackara, Gilbert B. Reed, and others, who, it was alleged, claimed some interest in the mortgaged premises as judgment creditors or otherwise, were made defendants to the bill.

It appeared from the record that the defendant Thackara had been superintendent of the mine and general agent of the mining company in Colorado, and was a stockholder. He held by purchase some of the notes or certificates of indebtedness secured by the mortgage issued to other parties, and held other notes issued subsequent to the mortgage to himself for his salary, etc. Prior to the institution of this suit, to-wit, on the 22d day of March, 1873, Thackara began suit against the mining company on his notes and a book account, caused a writ of attachment to be issued against the mining company, and on the 13th day of January, 1875, recovered a judgment for $23,442.12. Upon a sale under execution issued on this judgment, all the real and personal property of the mining company, including that covered by the mortgage, was sold to Thackara for the sum of $24,873.01, and he assigned the certificate of purchase to the defendant Reed, to whom a sheriff's deed was executed December 15, 1875. It was conceded that Reed had succeeded to all the rights and interests of Thackara. The bill was dismissed as to Thackara, and Reed substituted as defendant in his place.

Reed, by his answer, admitted the execution of the mortgage mentioned in the bill to secure the payment of notes made by the mining company, the sum secured by the mortgage not to exceed $17,000. He set up title to the mortgaged premises, claiming under the sheriff's deed executed to him under the sale made to Thackara. He averred that all the notes which had been secured by the bond and mortgage executed to Hare and Pugh, except two held by Samuel Nelson one for $25 and the other for $150, and one held by W. B. Wharton for $100, had either been transferred to Thackara, and were included in the amount of his judgment against the mining company, or had been converted into stock of the mining company and surrendered and were thus satisfied. Neither the mining company nor any of the other defendants made any defense to the suit,

and decrees pro confesso were taken against them. The answer of Reed was put in issue by replication. Upon final hearing on the pleadings and evidence, the circuit court dismissed the bill and the complainant Pugh, Hare having died pending the suit, appealed.

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